U.S. Department of Labor
Washington, D. C. 20210






July 3, 2003















Assistant Secretary




Planning Guidance for Work Opportunity Tax Credit and Welfare-to-Work Tax Credit Allotments for Fiscal Year 2003 and Transmittal of ETA Handbook No. 408 Third Edition, November 2002


  1. Purpose. To provide planning guidance to State Workforce Agencies (SWAs) responsible for management of the Work Opportunity Tax Credit and Welfare-to-Work Tax Credit allotments announced in Training and Employment Guidance Letter (TEGL) No. 23-02, and to transmit ETA Handbook No. 408 Third Edition, November 2002 (Handbook).

  2. References.  The Wagner-Peyser (W-P) Act, Section 7(d); the Small Business Job Protection Act of 1996 (P.L. 104-188); the Taxpayer Relief Act of 1997 (P.L. 105-34); the Tax and Trade Relief Extension Act of 1998 (P.L. 105-277); the Ticket to Work and Work Incentives Improvement Act of 1999 (P.L. 106-170); the Job Creation and Worker Assistance Act of 2002, (P.L. 107-147); November 1998, Second Edition of ETA Handbook 408; 29 CFR Parts 93, 96, 97, 98, and 99; OMB Circular A-87 and the ETA WOTC/WtW Web site: http://www.uses.doleta.gov/tax.asp.

  3. Background. On March 9, 2002, President Bush signed into law, the Job Creation and Worker Assistance Act of 2002, (P.L. 107-147) (herein referred to as the Act). It reauthorizes the Work Opportunity Tax Credit program and the Welfare-to-Work Tax Credit (WOTC and WtWTC) for a 24-month period, beginning January 1, 2002, and ending December 31, 2003. The reauthorization is retroactive to December 31, 2001, for both tax credits.

  4. Funding The WOTC and WtWTC activities operated under Continuing Resolutions (CR) until the Consolidated Appropriations Resolution, 2003 (Public Law 108-7) was signed into law February 20, 2003. Attachment II-A contains information on advanced funds issued through CR Number 5 to support uninterrupted administration of WOTC and WtWTC activities. Attachment II-B contains the Fiscal Year (FY) 2003 funding allocations for the SWAs.

    The total funding for FY 2003 is $20,863,500. This is a decrease of $135,500 from the FY 2002 appropriation due to a congressional across-the-board reduction of 0.65 percent to all FY 2003 discretionary programs. After reserving $584,200 for postage and $20,000 for the Virgin Islands, funds are distributed to the states by administrative formula with a $64,000 minimum allotment and a 95% stop-loss/120% stop-gain from the prior year allotment share percentage. The FY 2003 allotment formula is as follows:

    (1) 50% is allocated based on each state's relative share of total certifications issued for the WOTC and WtWTC program;

    (2) 30% is allocated based on each state's relative share of the Civilian Labor Force (CLF); and

    (3) 20% is allocated based on each state's relative share of the adult recipients of Temporary Assistance for Needy Families (TANF).

    The data utilized for these factors reflect actual certifications reported for FY 2001, Calendar Year 2001 CLF averages, and adult recipients of TANF for FY 2001.

  5. General Administration SWAs are responsible for administering WOTC and WtWTC, including the certification process and reporting program data on a quarterly basis. SWAs should use the planning instructions and guidance in this TEGL to prepare the FY 2003 WOTC and WtWTC plan. Authorization for the cost reimbursable grant is provided in W-P Act, Section 7(d). Pursuant to Training and Employment Information Notice No. 24-99, the ETA National Office continues to be the grant office authority for the Employment Service Cost Reimbursable Grant.

    Cost reimbursable grant funds are issued to SWAs for the administration and implementation of WOTC and WtWTC. ETA Regional Offices are responsible for conducting field level reviews of these cost reimbursable grants. This includes review and approval of state plans, analysis of expenditures and performance data, and on-site reviews. SWAs are expected to administer WOTC and WtWTC funds in accordance with the Act and applicable regulations, and the terms and conditions of the W-P Act Annual Funding Agreement, which includes administrative requirements and cost principles of Federal Regulations at 29 CFR Part 97 and OMB Circular A-87.

    Further, WOTC and WtWTC must be administered in accordance with the policies and procedural guidance set forth in the Handbook at http://www.uses.doleta.gov/tax.asp. The third edition of the Handbook consolidates and updates information included in the first two editions. Also, it includes the new provisions in P.L. 107-147, the most current reauthorizing legislation and provides clarifications and interpretations regarding specific definitions of terms and other program related requirements.

    The Handbook includes the following documents:

    Training on the Handbook, the new electronic ETA Enterprise Information Management System Tax Credits Reporting System (EIMS-TCRS), and the OMB approved Technical Assistance and Compliance Review Guide were provided at the WOTC and WtWTC National Training Conference held in October 2002. The Handbook, "Technical Assistance and Compliance Review Guide," and training materials are available electronically at http://www.uses.doleta.gov/tax.asp. (The EIMS-TCRS is an electronic system recently implemented for WOTC and WtWTC. See Reporting below for more details.)

    Current Federal Regulations at 20 CFR 658.400 Subpart E cover the complaint procedures. Other applicable regulatory provisions are incorporated in the grant plan Statement of Work (See Attachment III).

  6. Reporting SWAs should plan to expend all funds within the year (exclusive of “carry in” funds) on a quarterly basis. Prior year fund balances will remain with the respective PY/FY annual grant and should be expended under such grant agreements, Notices of Obligation and state plans and/or plan guidance. No plans are required for the FY 2002 allocations. Further, FY 2002 extensions for carry-in funds are not needed as long as funds are expended within the maximum December 31, 2003, statutory limit. SWAs should report expenditures quarterly by direct data entry of Standard Form 269 (SF-269) into the Web-based EIMS-TCRS. Quarterly financial reports are due within 30 days following the end of each quarter per 29 CFR 97.41(b) (4). Timely submission of these reports is extremely important to ensure proper accounting of funds. Regional Offices will conduct a financial reconciliation at the end of the fiscal year. Questions regarding financial management and reporting for FY 2003 or for any existing prior year fund balances should be addressed to the appropriate Regional Office.

    The Government Paperwork Elimination Act (GPEA) of 1998 (P.L. 105-277) requires that, when practicable, Federal agencies use electronic forms, electronic filing, and electronic signatures to conduct official business with the public by October 2003. During the period covered by this plan, quarterly program activity reports will be transferred to the EIMS-TCRS. The EIMS-TCRS is a Web-based system that will allow SWAs to meet the reporting responsibilities in a more efficient manner while reducing the reporting burden on the SWAs, regional and national offices. Initially, SWAs will manually enter the required quarterly data for Report No. 1, "Conditional Certifications Issued;" Report No. 2, "Certification Workload and Characteristics of Certified Individuals;" and Report No. 3, "Verification Results" to the TCRS. Instructions regarding operation of the TCRS and a User’s Guide were provided to the SWAs at a national training conference held in Orlando, Florida, October 28-31, 2002. Reports are due 45 days after the end of the quarter for Reports No. 1 and 2. Report No. 3 is due 45 days after the third month following the close of the reporting period. A schedule of report due dates is at http://www.uses.doleta.gov/tax.asp

  7. OMB Approval The Handbook and the data collection and reporting requirements contained in this TEGL were approved by OMB according to the Paperwork Reduction Act of 1995 under OMB approval No. 1205-0371, expiring December 31, 2004. The respondent's obligations to reply to these requirements are mandatory (P.L.104-188). Persons are not required to respond to this collection of information unless it displays a currently valid OMB control number.

  8. Grant and Plan Effective Date. Plans should be developed for a 12-month period beginning October 1, 2002, through September 30, 2003. SWAs may request extensions through the ETA Regional Office.

  9. Action Required SWAs are requested to take the following action:

    1. Immediately transmit this issuance to the appropriate staff.

    2. Submit three (3) copies of the WOTC and WtWTC Plan for FY 2003 to the appropriate Regional Office. Plans should be prepared in accordance with Attachments I, II-A, II-B, and III, Grant Procedures, Allocation Lists, and Plan Narrative Instructions and be submitted to the appropriate Regional Office 30 days after the issuance date of this guidance letter. The plan must include:

      1. Transmittal Letter
      2. Application for Federal Assistance (SF 424)
      3. Budget Expenditure Plan (SF 424 A - Section D only)
      4. Plan Narrative: These plans should include anticipated FY 2003 funded activities that will be for the period October 1, 2002, through September 30, 2003, based on the FY 2003 planning estimates (Attachment II-B).

  10. Inquiries. Program questions may be directed to the Regional Office or to Carmen Ortiz (Office of Workforce Investment, Division of USES/ALMIS) at (202) 693-2786. All questions regarding grant and financial issues should be directed to Gwendolyn Baron-Simms at (202) 693-3309 or Fred Tello (202) 693-3333.

  11. Attachments.

    1. Grant Procedures
    2. Advanced Allocations through January 11, 2002, CR #5
    3. Funding Allocation for FY 2003 Funds
    4. WOTC and WtWTC Plan Narrative Instructions
    5. ETA Handbook No. 408 Third Edition November 2002 at http://www.uses.doleta.gov/tax.asp